Home Loan Market Update – March 2017
Quick Summary
The Australian Prudential Regulatory Authority (APRA) is applying pressure to the major Lenders to slow the growth in property prices in Australia’s capital cities.
They are looking to do this by reducing the number of Investors in the market. This in theory should give owner occupiers and first home buyers a greater chance to enter the market.
APRA created new regulations requiring Lenders to cap the growth in investment lending to just 10% per annum.
Major lenders have responded by increasing the interest rate on their investment loan products to reduce the rate at which they are issuing investor loans in order to stay below the 10% growth benchmark.
CBA was the first to announce another round of interest increases on their Interest Only Variable Rate – Investment Home Loans. It is expected the other Lenders will follow suit.
CBA is encouraging customers who believe Interest Only repayments may no longer meet their needs to avoid this rate increase and switch to Principal and Interest repayments, which they can do online or by completing a switching request form, at no cost.
NAB has followed up by announcing a range of changes to their home loan rates, including increases to the interest rates for new and existing owner occupier and residential investment borrowers. And a new fixed rate for first home buyers – the lowest rate ever offered by NAB.
For more information regarding the individual banks and products affected, please check the table below. We will be updating this table on a regular basis as lenders update their rates in the next few days.
| Bank | Increase | Effective Date | Products Affected |
|---|---|---|---|
| NAB | 0.07% | 24 March 2017 | Variable Rate – Owner Occupier Loans |
| NAB | 0.25% | 24 March 2017 | Variable Rate – Residential Investor Loans |
| Westpac | 0.03% | 24 March 2017 | Owner Occupier Loans – Principal & Interest |
| Westpac | 0.08% | 24 March 2017 | Owner Occupier Loans – Interest Only |
| Westpac | 0.23% | 24 March 2017 | Investment Property Loans – Principal & Interest |
| Westpac | 0.28% | 24 March 2017 | Investment Property Loans – Interest Only |
| Westpac | 0.28% | 24 March 2017 | Line of Credit Loans |
| ANZ | 0.25% | 31 March 2017 | Residential Investor Loans – Principal & Interest |
| ANZ | 0.20% | 31 March 2017 | Owner Occupier Loans – Interest Only |
| ANZ | 0.20% | 31 March 2017 | ANZ Simplicity PLUS Residential Investment Loans – Interest Only |
| ANZ | 0.11% | 31 March 2017 | ANZ Standard Variable Residential Investment Loans – Interest Only |
| CBA | 0.12% | 3 April 2017 | Interest Only Variable Rate – Investment Home Loans |
| CBA | 0.04% | 3 April 2017 | Variable Rate Line of Credit Loans |
What You Need To Do
If you’re using an Interest Only Investment Home Loan, you need to:
- Speak with your Accountant – Check with your Accountant first to see if you are better off staying with your current Interest Only loan or switching to a Principal and Interest loan at a lower rate. While you can save on the interest paid by switching to a P&I loan on a lower rate, there maybe unintended tax implications.
- Speak with your Mortgage Broker – If your Accountant advises that you are better off on a P&I loan, contact your Mortgage Broker / Loans Advisor. They should be able to help you identify the loan that best suits your current needs.
- Review your loan – Contact your Mortgage Broker / Loans Advisor in order to organise a loan review. There maybe new Interest Only products on the market that are more suited to your current needs.
Remember, Interest Rate is important but it’s not the only factor when choosing a Lender.
The product, facility and bank policies all have to be able to help you achieve your financial goals. Every Lender has their pros and cons and everyone’s situation is different. What works for one Borrower, may not work for another.
